Carr Electronics Corp. v. Sony Corp. of America, C-76-2741 AJZ.

• Decision Date: 28 February 1979
• Docket Number: No. C-76-2741 AJZ.,C-76-2741 AJZ.
• Parties: CARR ELECTRONICS CORPORATION, Plaintiff, v. SONY CORPORATION OF AMERICA, Defendant.
• Court: U.S. District Court — Northern District of California

472 F. Supp. 9

CARR ELECTRONICS CORPORATION, Plaintiff, v. SONY CORPORATION OF AMERICA, Defendant.

No. C-76-2741 AJZ.

United States District Court, Northern District of California.

February 28, 1979.

Bartholomew Lee, San Francisco, Cal., Furth, Fahrner & Wong, Frederick P. Furth, San Francisco, Cal., for plaintiff.

Feldman, Waldman & Kline, Murry J. Waldman, Matthew P. Mitchell, Patricia S. Mar, San Francisco, Cal., Rosenman, Colin, Freund, Lewis & Cohen, Asa D. Sokolow, Naomi G. Litvin, New York City, for defendant and counterclaimant Sony Corporation of America.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ZIRPOLI, District Judge.

Plaintiff Carr Electronics Corporation ("Carr") filed this suit against Sony Corporation of America ("Sony"), alleging that the latter had violated section 1 of the Sherman Antitrust Act, 15 U.S.C. section 1, by unlawfully engaging in a scheme to maintain the retail prices of color television sets that it manufactured and distributed to its dealers, including Carr. With discovery closed and trial less than three weeks away, Sony has moved the court for summary judgment on the plaintiff's antitrust allegations. For the reasons hereinafter stated, the court grants Sony's motion for summary judgment.

Prior to July 31, 1977, Carr was a dealer of Sony products. In the years preceding 1976, Sony availed itself of California's Fair Trade statutes, which permitted a manufacturer to dictate the minimum retail prices that dealers of its products might charge their customers. Effective January 1, 1976, the California Legislature repealed these statutes, making vertical price restraints subject to the general constraints of the antitrust laws. On and after that date, Carr and several other dealers whose operations were characterized by low overhead and high volume began to advertise prices substantially below the prices that had prevailed during the Fair Trade period. Plaintiff has introduced evidence tending to show that many of the dealers who sold Sony televisions as part of a general merchandise business, such as R. H. Macy Co. ("Macy's") and the Emporium Capwell Co. ("Emporium") complained forcefully to Sony that they were unhappy with the fact that several low-overhead dealers were underselling them;¹ in fact, one of the department stores accused the discounters of selling below cost.

Carr alleges that thereafter Sony, in concert with others, began to exert coercion upon Carr to raise the retail prices that it charged for color television sets. The coercion was allegedly manifested in several ways: in the later months of 1976, Sony is alleged to have withheld television sets from Carr despite Carr's timely orders; Sony declined to increase the amount of credit that it extended to Carr for the purchase of televisions; when Carr sought and obtained alternative credit from the General Electric Credit Corporation ("GECC"), Sony allegedly pressured GECC into terminating Carr's credit, which GECC in fact did in April of 1977; finally, in May of 1977, Sony notified Carr that Carr's contract of dealership would be terminated effective July 31, 1977, and in fact Carr was terminated on that date.

Carr offers three theories in support of its claim that Sony combined or conspired with others to impose vertical price restraints: (1) Carr claims that an explicit agreement between Sony and the major department stores, including Macy's, existed, and the existence of the agreement may be inferred from the fact that the dealers complained and Sony acted; (2) Carr claims that a "tacit" agreement existed between Sony and the other dealers, which agreement may be inferred from Sony's suggestions that retail prices designated by it be charged by the dealers, and the dealers' compliance therewith; or (3) that Sony enlisted the aid of GECC to enforce its policy of vertical price restraints.² While the court does not dispute the legal sufficiency of these allegations, the court grants Sony's motion for summary judgment because of Carr's inability to demonstrate, as it must on a motion for summary judgment, that it possesses facts sufficient to support the allegations.

The court is mindful of the admonitions of the Supreme Court and the court of appeals that summary judgment should be used "sparingly in complex antitrust litigation . . ." Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1973); Cornwell Quality Tools Co. v. C.T.S. Co., 446 F.2d 825, 832 (9th Cir. 1971), cert. denied, 404 U.S. 1049, 92 S.Ct. 715, 30 L.Ed.2d 740 (1972). The appellate courts have also recognized, however that "if an antitrust plaintiff, as well as any other plaintiff, does not present enough evidence within his case-in-chief to support a reasonable finding in his favor, a district court has a duty to direct a verdict in favor of the opposing party." Chisholm Bros. Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137, 1139-40 (9th Cir. 1974). The court concludes that this is the situation in the present case.

The Supreme Court has stated the guidelines for determining the existence of an antitrust violation. A manufacturer may decline to do business with whomever it chooses, so long as the refusal to deal is not part and parcel of an independent antitrust violation. United States v. Colgate & Co., 250 U.S. 300, 39 S.Ct. 465, 63 L.Ed. 992 (1919). The manufacturer may not, however, engage others, such as wholesalers and distributors, to aid in the enforcement of the plan to terminate a dealer for the latter's refusal to charge the prices suggested by the manufacturer. United States v. Parke, Davis & Co., 362 U.S. 29, 80 S.Ct. 503, 4 L.Ed.2d 505 (1960). Where other persons or entities are enlisted to assist in the coercion, a per se violation of section 1 of the Sherman Act has been committed. Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968).

The Court of Appeals for the Ninth Circuit has provided additional guidance for determining when a conspiracy vertically to restrain prices has been proved. In Chisholm Bros. Farm Equipment Co. v. International Harvester Co., 498 F.2d 1137 (9th Cir. 1974), the Ninth Circuit, relying on Albrecht, Parke Davis, and Colgate, noted that it was necessary for a plaintiff to prove both a conspiracy and coercion in order to state a claim under section 1 of the Sherman Act. 498 F.2d at 1140 n.6.

In the instant case, the court is clearly convinced that Carr has failed to make a case for any conspiracy or combination involving Sony that had as its purpose or effect the maintenance of retail prices.³

With respect to proof of a tacit conspiracy to fix retail prices, Carr would be required to show that either Carr itself or other dealers observed Sony's retail price suggestions on pain of retaliation. Santa Clara Valley Distributing Co. v. Pabst Brewing Co., 556 F.2d 942 (9th Cir. 1977) (plaintiff failed to show that it had followed defendant's price suggestions); Hanson v. Shell Oil Co., 541 F.2d 1352 (9th Cir. 1976) (no proof that other dealers followed retail price suggestions on pain of withdrawal of "dealer assistance" program). Carr has not offered any proof that any other dealer accepted a price suggestion for fear that Sony would limit its credit, obstruct other sources of credit, delay in filling its orders, or terminate its dealership agreement. In fact, Carr has not even offered to prove that other dealers followed Sony's retail price suggestions in any manner or for any reason. To the contrary, Sony has produced evidence that numerous Sony dealers within the relevant market area (the San Francisco Bay Area) had advertised Sony color televisions at prices at or below that advertised by Carr. Thus, no tacit agreement can be shown.

With respect to Sony's role in the termination of GECC financing, the only evidence that Carr puts forward is the deposition of one Mr. Tommy Green, a GECC employee, wherein it is stated that immediately prior to GECC's termination of Carr's financing, GECC employee Hoffman spoke on the telephone to Sony credit employee Perry. Sony does not dispute that the phone conversation occurred, and indeed admits that several such conversations had occurred in the preceding months.

The mechanics of the financing arrangement called for Sony to ship products to Carr upon GECC's approval of the proposed purchase. GECC would then pay Sony and Carr would be obligated to GECC. Sony charged Carr a three percent fee for handling the transaction through the outside financier, called a "flooring fee." When dealers obtain their financing directly from Sony through its "Finance America" credit division, Sony absorbs this charge, but, as a matter of policy, it requires all dealers with outside financing to pay for the flooring charges. Carr has not presented any evidence that the flooring charge was levied only against it, or only against dealers whose prices are below the suggested retail levels, or in any manner other than that suggested by its policy.

The deposition of Mr. Green, who did not participate in or overhear the conversations between Hoffman and Perry, contains Mr. Green's statement that the topic of conversation was the flooring charge. Sony does not dispute this, despite its hearsay character. Carr would ask the trier of fact to infer from (1) the fact of the phone call, (2) the fact that the flooring charges were discussed, and (3) the fact that GECC terminated Carr, the conclusion that Sony pressured GECC into terminating Carr. Such an inference cannot reasonably be drawn. The fact of the phone call is innocuous in the face of...